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If Buying Domestic Goods Can Boost Domestic Economy, Why Do People in The U.S. Keep Buying Foreign Goods, Creating a Huge U.S. Trade Deficit?
Americans buy various products and services from many foreign countries. This affects U.S. balance of payment negatively. This essay examines some of the reasons why Americans prefer imported goods to domestic goods.
Americans import some goods since they cost less compared to domestically manufactured goods (Revenga 255-284). The differences in prices of the goods are due to the availability of cheap labor in the foreign countries, coupled with favorable policies on corporate taxes, wage rates that are lower, subsidies from the government and fewer regulations.
All these factors combined; make manufacturing of goods in a country cheaper as compared to the United States. For example, most Americans prefer Japanese electronics such as the Samsung phone which is more affordable compared to the iPhone. Therefore, importing of goods leads to saving money for the Americans in the long run.
Americans tend to import goods due to the perception that some of the imported goods have a higher quality compared the locally manufactured goods. For example, most Americans prefer the Swiss watches because of the perception that imported products are prestigious and of high quality (Joachim and Pemberton 23-34).In conclusion, most Americans prefer imports to domestically manufactured goods due to their cost, lack of alternatives and better quality which has a significant impact on the balance of payment.
Revenga, Ana L. “Exporting jobs? The impact of import competition on employment and wages in US manufacturing.”The Quarterly Journal of Economics, vol. 107, no. 1, 1992, pp. 255–284.
Zietz, Joachim, and Donald K. Pemberton. “The U. S. Budget and Trade Deficits: A Simultaneous Equation Model.” Southern Economic Journal, vol. 57, no. 1, 1990, p. 23., doi:10.2307/1060475.